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What Do Employee Referral Programs Do? Measuring the Direct and Overall Effects of a Management Practice

Author

Listed:
  • Guido Friebel

    (Goethe University of Frankfurt, CEPR and IZA)

  • Matthias Heinz

    (University of Cologne and CEPR)

  • Mitchell Hoffman

    (University of Toronto Rotman School of Management and NBER)

  • Nick Zubanov

    (University of Konstanz and IZA)

Abstract

Employee referral programs (ERPs) are randomly introduced in a grocery chain. On direct effects, larger referral bonuses increase referral quantity but decrease quality, though the increase in referrals from ERPs is modest. However, the overall effect of having an ERP is substantial, reducing attrition by 15% and significantly decreasing labor costs. This occurs, partly, because referrals stay longer than non-referrals, but, mainly, from indirect effects: non-referrals stay longer in treated than in control stores. The most-supported mechanism for these indirect effects is workers value being involved in hiring. Attrition impacts are larger in higher-performing stores and better local labor markets.

Suggested Citation

  • Guido Friebel & Matthias Heinz & Mitchell Hoffman & Nick Zubanov, 2022. "What Do Employee Referral Programs Do? Measuring the Direct and Overall Effects of a Management Practice," ECONtribute Discussion Papers Series 164, University of Bonn and University of Cologne, Germany.
    • Handle: RePEc:ajk:ajkdps:164
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    2. Sule Alan & Gozde Corekcioglu & Mustafa Kaba & Matthias Sutter, 2023. "Female Leadership and Workplace Climate," ECONtribute Policy Brief Series 057, University of Bonn and University of Cologne, Germany.
    3. Emre Ekinci, 2022. "Monetary rewards in employee referral programs," Manchester School, University of Manchester, vol. 90(1), pages 35-58, January.
    4. Block, Sidney T. & Friebel, Guido & Heinz, Matthias & Zubanov, Nick, 2022. "Mystery Shopping as a Strategic Management Practice in Multi-Site Firms," IZA Discussion Papers 15599, Institute of Labor Economics (IZA).
    5. Daniel Ober-Reynolds, 2023. "Estimating Functionals of the Joint Distribution of Potential Outcomes with Optimal Transport," Papers 2311.09435, arXiv.org.
    6. Benjamin Lester & David A. Rivers & Giorgio Topa, 2021. "The Heterogeneous Impact of Referrals on Labor Market Outcomes," Staff Reports 987, Federal Reserve Bank of New York.

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    More about this item

    Keywords

    Management practices; organizational economics; hiring; respect;
    All these keywords.

    JEL classification:

    • M51 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Firm Employment Decisions; Promotions
    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects
    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights

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